The Minimum Wage, Turnover, and the Shape of the Wage Distribution

with David A. Green, Thomas Lemieux and James Townsend

Journal of Labor Economics (forthcoming)

Abstract:

This paper models the distributional effects of minimum wages using a hazard- based approach that rescales the wage distribution to control for possible employ- ment effects. Contrary to the predictions of a neoclassical model, Job Leavers are not concentrated below the new minimum wage following a minimum wage increase. For Job Stayers, the spike and spillover effects of the minimum wage are simply shifted right to the new minimum wage. These findings are consistent with a model where entry wages are set according to a job ladder, and where firms preserve their internal wage structure due to fairness or internal incentives issues.

Older version: NBER Working Paper No. 33479, February 2025 

CLEF Working Paper No. 59, April 2023